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Libertarianism and Federalism

Federalism is a political system with multiple levels of
government, each of which has some degree of autonomy from the
others. The United States has a federalist system that encompasses
the national government, states, and localities. The United States
adopted federalism in part to prevent abuses of power and to
preserve individual liberty. Federalism serves those goals by
helping individuals to “vote with their feet,” thereby
fostering interjurisdictional competition. Such benefits are most
likely to be found in federal systems where subnational governments
have an incentive to compete for residents and businesses because
they must raise most of their revenue from their own taxpayers, as
opposed to receiving subsidies from the central government. In many
ethnically divided societies, federalism can also enhance liberty
by reducing ethnic conflict and oppression. However, federalism can
also endanger liberty or property by empowering subnational
governments to exploit owners of immobile assets, most notably
land. Federalism can also permit local majorities to oppress local
minorities. Contrary to James Madison’s expectations, federalism in
the current era is unlikely to constrain the national government
since states have incentives to support the expansion and
centralization of power in Washington. Whether federalism enhances
liberty depends on circumstances and institutional design.

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Ilya Somin is professor of law,
George Mason University School of Law, and author of The Grasping
Hand: Kelo v. City of New London and The Limits of Eminent Domain
(forthcoming), and Democracy and Political Ignorance: Why Smaller
Government Is Smarter (2013).